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Go With The Flow

A property intended as an Airbnb has ended up being a buy-reno-sell after Covid-19 and a raft of other factors changed the playing field, writes Joanna Mathers. RENOVATION The Rotorua market is steaming ahead (excuse the pun), but when Nick Gentle, a co-owner of iFindProperty, purchased a 1960s brick-and-tile just after the 2020 lockdown, he stumbled on a bargain. “The owner had to sell within 48 hours, because they had a contract on a unit that was ending in two days,” says Gentle. So, the “motivated seller” accepted the unconditional offer of $580,000 and Gentle secured himself a bargain. He admits his “due diligence” on the property wasn’t exactly stringent. “I looked through the house and under the floor and it all looked solid,” he admits. “I am used to buying houses that are over 100 years old and falling down, so this all looked pretty good to me. But my lawyer wasn’t impressed!” Gentle (and buying partner Maree Tassell) bought the property with Airbnb in mind – Rotorua being one of the country’s pre-eminent tourist destinations. And while it was dated (“I don’t think anything had been done to it in 20 years”) it had potential. With four bedrooms and two large bathrooms, plus an extra toilet, it was perfect for renting on a short-term basis to large groups visiting the thermal city. KITCHEN ISSUES But events over the next couple of years, including lockdowns, would change Gentle’s plans ... more on this later. The house was aged, with old carpet, a dated peach-coloured bathroom, and an unusual kitchen. “There was an attached kitchen island separating the kitchen from the dining room,” says Gentle. “But at the end of the island was the fridge, it was kind of this monolith in the middle of nowhere,” he laughs. It was your classic makeover job: as the

By: Joanna Mathers

1 March 2022

The Rotorua market is steaming ahead (excuse the pun), but when Nick Gentle, a co-owner of iFindProperty, purchased a 1960s brick-and-tile just after the 2020 lockdown, he stumbled on a bargain.

“The owner had to sell within 48 hours, because they had a contract on a unit that was ending in two days,” says Gentle.
So, the “motivated seller” accepted the unconditional offer of $580,000 and Gentle secured himself a bargain. He admits his “due diligence” on the property wasn’t exactly stringent. “I looked through the house and under the floor and it all looked solid,” he admits. “I am used to buying houses that are over 100 years old and falling down, so this all looked pretty good to me. But my lawyer wasn’t impressed!” G
entle (and buying partner Maree Tassell) bought the property with Airbnb in mind – Rotorua being one of the country’s pre-eminent tourist destinations. And while it was dated (“I don’t think anything had been done to it in 20 years”) it had potential. With four bedrooms and two large bathrooms, plus an extra toilet, it was perfect for renting on a short-term basis to large groups visiting the thermal city.

Kitchen Issues

But events over the next couple of years, including lockdowns, would change Gentle’s plans ... more on this later.

The house was aged, with old carpet, a dated peach-coloured bathroom, and an unusual kitchen. “There was an attached kitchen island separating the kitchen from the dining room,” says Gentle.
“But at the end of the island was the fridge, it was kind of this monolith in the middle of nowhere,” he laughs.

It was your classic makeover job: as the house was sound, there was no need for time-consuming structural work. But all floorings were replaced, the ageing carpet removed and hardwearing, neutral beige installed in its place, with wood-look vinyl an attractive and durable option in the kitchen and bathrooms.

The walls were repainted: formerly a washed-out apricot-type colour replaced with pale cream.

But there were a couple of “curly” issues: the weird kitchen and some odd windows in the French doors in the living room that featured “curved” glass.

While it was easy enough to replace the glass in the doors, they needed to get the house out on the Airbnb site, so the kitchen was “as is” for a while.

“There was such a big waiting list for kitchens, so we put down our names and just left the kitchen as it was,” says Gentle. “There were pictures of it on the website, so people knew what it was going to look like.”

Slight Care

The listing went up on the Airbnb site late in 2020, and the property proved popular with visitors. But after their first guest they had a slight scare.

“There was this grime in the bathroom and the rubbish bin outside was really heavy. We were thinking ‘oh no, has someone been cooking meth in here’?”
Searching through the bin with rubber gloves, they came across what appeared to be a gas cylinder. “We were thinking, ‘oh no, is this from some kind of chemistry thing used to make drugs’?”
But no. “It was actually a helium party balloon filler,” Gentle says. “So that was a relief!”

It would end up taking nearly a year for the kitchen renovation to start. The nationwide lockdown restricted any movement in August 2021, so there were zero bookings, but the kitchen reno eventually happened in September.

“We have worked with a company called Innovative Kitchens in the past and they have been really good,” says Gentle. “They were able to help with little things: like sourcing a bench for us that was slightly larger than the standard widths you’d find at other suppliers. Now the bench comes out slightly over the front of the dishwasher, which looks better.”

But several factors would conspire against the long-term feasibility of using this property as a short-term rental. The first was Covid: continued lockdowns, “red” setting restrictions (which saw many Rotorua events cancelled) and ongoing border closures.

Then there was a yield issue after the new valuation, given the extensive renovations. “The yield would be fine if we had been looking at the value we bought it for. But using the current valuation, it doesn’t add up.”
The removal of mortgage interest deductibility was the final straw. “We eventually came to the decision that we would have to sell.”

Colour Change

So, in early February this year, the house exterior was painted in Resene Ironsand (a dark grey), which contrasts nicely with paler grey windowsills, to maximise the house’s appeal.

It’s now on the market, with a price indication of the late $800,000s. The renovation cost around $100,000, and the profit after expenses will be in the same ballpark.

It’s been an interesting journey, with a pragmatic conclusion. Gentle is a buyrenovate- hold investor by inclination, but sometimes the rules of the game change, and it’s best to let go.

“I think that I was also too busy to really put a whole lot of energy into running an Airbnb property,” he says.
However, it’s still been a worthwhile exercise, and he’s coming out of it with a fair whack of profit. “We will have to pay tax under bright-line, but that really doesn’t bother me too much,” says Gentle.

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